Navigating the Carbon & Energy Transition: A Guide for Australian Businesses in 2024

Guide for Energy & Carbon 2024 - Northmore Gordon

As we move into 2024, the pressing issue of climate change continues to grow, along with the resurgence of El Niño, we once again see soaring temperatures across many states, intensifying the risks of bushfires, droughts, and no doubt further coral bleaching. The urgent call for action at COP28 is gain much greater consensus for a target of 42% reduction in greenhouse gas emissions by 2030 to limit global warming to 1.5 degrees Celsius. With this increasing urgency, sustainability is now a fundamental consideration in business governance and board decision-making. Earlier movers will be better prepared, gain customers as well as reduce risk.

Business are facing multiple challenges:

  • Rapidly changing policy settings
  • Climate-related Financial Disclosures
  • Financing the energy transition
  • Finding the right business partners

In this article, we will touch on a few of the topics above.

Rapidly Changing Policy Settings

Regardless of whether you work for a manufacturer, warehouse, operate retail assets, or office-based business, here are some things you will need to look out for in 2024 in Australia.

  • Mandatory Climate-related Financial Disclosures. By 2025 large businesses, and by 2026
    business medium-sized businesses will need to start their journey for better governance, risk management, disclosure, and structured reporting for Scope 1, 2 and 3 emissions
  • Australia’s Second Annual Climate Change Statement. The federal government tabled
    the second statement outlining progress and policy, impacts and risks
  • Safeguard Mechanism. Emissions caps tighten up for Australia’s largest businesses
    continues to be refined with consultation closing mid-January 2024
  • The Australian Governments Powering Australia has $1.9B in funding across grants for
    decarbonising trade-exposed facilities, emissions reductions for industrial facilities through ARENA, clean energy programs for primary manufacturing, as well as the National Adaption Plan and Flood Warning Infrastructure Remediation
  • The $20B Rewiring the Nation is central to Powering Australia to modernise the grids.
  • AEMO 2024 Integrated System Plan (ISP) has just released consultation for the roadmap
    for the National Electricity Market
  • Victoria’s Gas Substitution Roadmap. The roadmap will drive electrification and help empower Victorian households and businesses to switch fuels

  • Climate Reporting Obligations: The journey towards mandatory climate reporting obligations, confirmed by the Australian Government in early 2023, enters its implementation phase
    starting on 1 July 2024. Guided by the International Sustainability Board’s Global Climate
    Reporting Standards IFRS S1 & S2, the Australian Accounting Standards Board (AASB)
    released Exposure Draft ED SR1 in late October 2023. This monumental shift in corporate
    reporting will impact organizations of all sizes, spanning listed and private businesses, as well as government entities
  • Reporting Stages and Key Metrics: The transition to mandatory climate-related reporting will unfold over three stages, reaching full compliance by 2027. Reporting will hinge on key organizational metrics such as Total Revenues, Gross Assets, and Employees. Companies will be required to incorporate climate-related disclosures into their Financial Reports, necessitating Director sign-off. To meet these new demands, effective data management will be paramount for all reporting entities
  • Preparing for Change: ASIC Chair Joe Longo emphasized the monumental nature of this
    shift, stating that it represents “the biggest change to corporate reporting in a generation.” Businesses are urged to embark on this journey early, making the necessary investments in
    people and systems to navigate these changes effectively

Financing the energy transition

Fortunately, there are now multiple ways to finance or support the energy transition projects:

  • Government Grants: The federal government has a wide raft of (matched) grant funding
  • Environmental Certificates: provide either aiding payback or supporting immediate progress
  • Substantial funding: is seeking a home in energy transition with third-party ‘energy as a
    service’ financiers’ and other business models

Spotlight Powering Australia Government Grant: Empowering Industries for Transformation

  • The Industrial Transformation Stream (ITS) Program: This $400 million program, is backed
    by the Australian Renewable Energy Fund (ARENA). It offers a unique chance for businesses
    in manufacturing, mining, processing, transport, agriculture, forestry, and construction to
    reduce emissions, cut costs, enhance competitiveness, and foster job creation
  • The $43m National Industrial Transformation Program (NIT Program) (previously the Industrial Energy Transformation Program, IETS) also run by ARENA is still
    open to assist large energy users in engineering and feasibility studies to lower energy costs and reduce emissions
  • The $600m Safeguard Transformation Stream (STS) to support decarbonisation
    investments at trade-exposed industrial facilities
    covered by the Safeguard Mechanism.
    Announced in 2023 the STS is now open for applications

Final words from our Directors – 9 Key Areas Not to Be Overlooked in 2024

  1. New technologies: Hotwater (and space) heatpumps are getting a lot of airtime, and deservedly so. They combine both a 3-5x improvement in energy efficiency with electrification to displace natural gas and reduce emissions. Hotwater heatpumps replacing both electric resistance and natural gas hotwater have lower emissions and when coupled with Solar PV the emissions factor drops to near zero. To date this has mostly been in residential and small commercial. It’s beginning to find it ways into larger thermal requirements
  2. Using renewable energy is easy; emissions from Electricity (Scope 2) can be reduced through not only behind-the-meter Solar PV, but also is as simple as buy & retiring RECs (renewable energy certificates) such as Large-scale Generation Certificates (LGCs) as an alternative to Power Purchase Agreements (PPAs). RECS are global recognised, with high integrity and used by the world’s largest organisations in the world to achieve RE100 status (100% renewable energy) in all their sites. RECs can also be used to help reach Climate Active Carbon Neutral certification in Australia
  3. Scope 1, 2 and increasingly important scope 3 emissions: it’s essential to recognize the profound impact of addressing Scope 1 (onsite) & Scope 2 (electricity) but readying your business to understand and measure Scope 3 emissions is where the leaders are focus. Scope 3 are the emissions from both your supply chain and your customers. However, they also represent a vast opportunity to make a significant difference. Engage with your supply chain partners, and collaborate on creative solutions. This interconnected approach doesn’t just reduce emissions; it builds lasting partnerships and opens doors to new markets and opportunities
  4. Assess your Net Zero Roadmaps: Don’t treat your roadmap as static. Question your progress at every turn. Are you meeting your emissions reduction targets? Is there room for improvement? A great way to start is to understand this very complex space, the second is do a gap analysis and start your journey
  5. Energy Audits and Energy Efficiency Opportunities: One of the most valuable tools in your sustainability toolkit for 2024 is the energy audit. These audits aren’t just a routine task;
    they are a strategic investment with tangible benefits for your business. Energy audits go beyond just identifying areas where energy efficiency can be improved. They are the key to optimizing your energy consumption and, in turn, reducing operational costs. When you dig deep into your energy usage, you unearth opportunities that can lead to substantial savings
  6. Environmental Certificates: Understanding the treatment under Australian and international protocols is becoming increasingly important. Get this right and you can accelerate your transition. Get this wrong and you’ll end up in the AFR accused of Greenwashing, or worse, getting a call from the ACCC. Read more about it here with our Carbon Accounting, Environmental Certificate Treatment and Public Disclosure article
  7. Buying and Retiring Certificates: Consider the option of buying and retiring certificates to demonstrate your commitment to sustainability and support renewable energy projects. Report progress against internal goals, or against accreditations such as RE100, Science Based Targets initiative, or Climate Active
  8. Warehousing Certificates: Northmore Gordon has the facilities for corporations to buy spot Carbon Certificates (Australian and International) and warehouse them for future retirements or Investment opportunities, many organisations believe the price will increase over the coming year
  9. Climate Active Certification: Pursue Climate Active certification to showcase your organisation’s commitment to carbon neutrality and sustainability

As we move deeper into 2024, Australian businesses find themselves at a pivotal juncture where sustainability and climate responsibility are integral to their future. The challenges posed by climate change necessitate proactive measures and a willingness to embrace change. By participating in initiatives like the Industrial Transformation Stream Program, preparing for mandatory climate-related reporting, and addressing their carbon and energy strategies, businesses can not only mitigate risks but also capitalize on opportunities for growth and success in an evolving landscape. Those that prioritize environmental responsibility will not only thrive but also play a crucial role in shaping a sustainable future for Australia and the global community.

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